SPEA professor defines 1 percent

Professor Brad Heim has defined the 1 percent, the target of the Occupy Wall Street movement that has spread across the United States.

Occupy protests by the 99 percent are springing up locally, and the backlash from last week’s sit-in at the Kelley School of Business has inspired even more discussion concerning what the Occupy movement is about.
 
Heim, an economics associate professor in the School of Public and Environmental Affairs, said one talking point should be defining who exactly falls into the 1 percent category.

“The top 1 percent is more varied than people might think,” he said. “I think it’s important to realize and understand who is in the top 1 percent and what it takes to make it to the 1 percent.”

Heim, with co-authors Adam Cole from the U.S. Department of the Treasury and Jon Bakija from Williams College, released a study in November 2010 called “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data.”

Heim formerly worked as a financial economist in the Office of Tax Analysis for the U.S. Department of the Treasury from 2006 to 2010.

During his time there he collected data from tax returns to map out what defined these presumed “1 percenters.”

By analyzing tax returns from the highest earners in the country, Heim and his co-authors discovered the occupations of the 1 percent based off an occupation check box on the forms.

New York Times columnist David Brooks mentioned their work in an article he wrote last week, calling it “the most authoritative research on who these top 1 percenters are.”

The study determined that roughly 31 percent started or manage non-financial businesses. Approximately 16 percent are doctors, and 14 percent are in finance.
Eight percent are lawyers, 5 percent are engineers and 2 percent are in media, sports or entertainment.

Heim said that, judging from the protests, the occupiers are opposed to people who work at investment banks and make a lot of money.

But he was quick to point out that only 14 percent of the 1 percent works in finance. The other 86 percent are employed elsewhere.

“It really applies to one hundredth of one percent,” he said. “To be in the top one percent you don’t have to be a hedge fund manager.”

Heim said that to qualify for the 1 percent, you have to make $300,000-400,000 per tax unit.

This means that if each member of a married couple makes $150,000 a year, they would be considered 1 percenters.  

“That’s still a lot of money, but that could include doctors, lawyers and even professors on this campus,” he said.

Heim said there is a growing gap between not just the first percentile and the 99th percentile, but also between the 10th percentile and the 90th percentile.

And to go one step further, as Brooks wrote in his Times article, there is also an equality gap within the 99th percentile between those who have a college degree and those who do not.

The data that used to define the 1 percent was from 2005, so Heim and his colleagues plan to update the report in January 2012.